A global provider of equipment for the offshore drilling industry was considering a new leasing and turnkey services model with a global drilling contractor. The company had not had experience in leasing agreements and consequently, was unaware of the cost and expectations to maintain their equipment on a daily basis. To address this, the company created a data model to consolidate known and unknown risks, estimated capital, and operating costs. Trenegy was brought in to validate their assumptions and assess the overall value of introducing a leasing model.
Trenegy first met with key personnel to review the leasing model and identify its strengths and weaknesses. Next, Trenegy performed a market review to generate average maintenance and repair costs, which were then incorporated into the pricing model for more accurate cost expectations. Working with the company’s risk team, Trenegy addressed an exhaustive list of capital and operating risks that were mitigated or closed out, developing much-needed contract language and reducing excessive contingency costs. Finally, Trenegy generated a cost of ownership model for the customer base and a value-focused pricing model for the equipment provider.
When the model assumptions were validated and the inputs were updated, additional sensitivities were included in the model to allow for flexibility as the organization moved forward with the leasing structure agreement. The company gained a better understanding of their customer’s value proposition and expanded on contractual language to minimize their risk associated to leasing and maintaining the leased equipment.